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Tax

Fiscal general information

Tax rates in 2021, Romania vs EU27 (%)

Source: KPMG

Corporate income tax

At the same time, the standard corporate income tax rate of 16% remained constant over the last 17 years. It is also one of the lowest in Europe, well below the EU27 average of 20.71%.

The current withholding tax rate in Romania is 5%.

In general, the dividends paid are non-taxable if the beneficiary of the dividend had a minimum holding of 10% in the share capital of the distributing company, for an uninterrupted period of at least 1 year.

Non-residents may be eligible for a reduced rate under DTTs (double tax treaty).

Corporate income tax 2021

Source: KPMG

Fiscal incentives

The Romanian standard VAT rate is 19%.  It has been reduced twice during 2010-2021 period, from 24% to 20% in 2016 and then to 19% in 2017, remaining constant over the last 5 years.

A reduced rate of 9% applies to food, water supply and sewerage, water for irrigation in agriculture, fertilizers and pesticides supply used in agriculture, seeds and other agricultural products for sowing or planting, medicines for human and veterinary use, medical equipment for disabled persons, etc.

An extra-reduced rate of 5% applies to accommodation, restaurant and catering services, newspapers, magazines, admission fees to castles, museums, zoos and botanical gardens, theaters, fairs, exhibitions and cultural events, transport of persons for tourism purposes etc.

Amongst fiscal incentives in Romania, the Fiscal Code includes, for example, a 16% corporate tax relief for profit reinvested in new technological equipment used for business purposes and a personal income tax exemption for salary income for employees in IT or those part of teams that carry out research & development and innovation projects.

VAT Rates 2021

Source: KPMG

Micro-enterprises

The turnover tax rates used for micro-enterprises are:

  • 1% for micro-enterprises with one or more employees.
  • 3% for micro-enterprises with no employees.

A company (Romanian legal entity) is considered a micro-enterprise if its maximum turnover is up to EUR  1 million at the end of the previous year.

However, any company with a minimum subscribed share capital of 45,000 RON and at least 2 employees may opt for applying the corporate income tax in lieu of the mandatory revenue tax, even if its turnover is less than EUR 1 million.

Personal income tax

In Romania, the standard personal income tax rate is 10% (with a few variations). It has been reduced twice during the 2004-2021 period, from 40% to 16% in 2005 and then to 10% in 2018.

As it can be seen from the graph below, it is the lowest individual tax rate in the EU, the EU average being 37,87%.

Personal income tax 2021

Source: KPMG